Culture Change: what does it take to change culture in a business? in the banking industry?

The latest ‘banking scandal’ and a statement from Ed Milliband (Leader of the Opposition) caught my attention and has inspired me to write about culture and the role/contribution of the CEO. Let’s start with the statement and take it from there:

“It was clear Bob Diamond was not the man to lead the change that Barclays needed. But this is about more than one man. This is about the culture and practices of the entire banking system which is why we need an independent, open, judge-led, public inquiry.”

I am going to start with tackling culture, then what it takes to change culture in a business organisation and I will end up with my take on what it will take to change the culture of the financial services industry.

What is culture? And are culture and practices distinct?

A lot has been written on culture and most of it is not particularly useful – as in actionable. Some of it is even been written by people who have pretty much always swam in the one culture and/or spent their lives in the ivory tower of academia. And I say people in academic ivory towers make stuff more complicated than is necessary or useful. Isn’t that the job of professors, gurus and other ‘witch doctors’?

Let’s attack this question of culture differently. How do you know that you are in presence of culture? Put differently, how does culture manifest itself? Look into this and you are likely to find that you and I do not have access to the ‘beliefs’, ‘shared assumptions’, ‘mental models’ of others. No, you and I are up to our necks in language and practices. What we notice, what impacts us, what we participate in is language and practices – we cannot escape language and practices.

Languages and practices are not neutral – they both indicate cultures and they shape/influence/change cultures. Allow me to give you an example – the dramatic changes in the UK’s public sector. Have you ever wondered why the ‘humanity’ / the ethos of ‘public service’ has been driven out of our public institutions in the UK? I have traced this to the introduction,and subsequent growth, of the ‘language of business’ into the public sector which drove out the language of ‘public service’. And the introduction of ‘private sector management practices’ that drove out the ‘public sector administration practices’. If you have not noticed this then let me make it clear – language and practices go together like two sides of the coin.

Culture and practices are not distinct. Practices are culture. Change practices – let go of existing practices, adopt/model new practices – and you change culture. Language is a special case – an incredibly important practice. A practice that shapes/changes other practices. And also a practice that is in turn moulded/shaped by practices. Just think of how the English language of today is so different to the English of Shakespeare. Or think about ‘human rights’ – the term did not exist once upon a time. It was invented and its invention led to practices associated with human rights. Think about the practice of science and the conquest of nature. When did it take off in a big way? After Descartes changed language so that language glorified reason and science.

Who/what does it take to change the culture of a company, a business?

Lets say that you want to change the culture of your business from product-centred to customer-centred. Or from command and control management to collaboration (social business). Or simply from command and control to Upside Down Management where the focus is on empowering/inspiring the front line to do what is right for the customer and delivering great customer service. Who is the person in the business that you should entrust with this mission? And how should this person go about it and what can this person expect? I say it is worth listening to what John Timpson (Chairman of the high street chain Timpson) has to say in his book Upside Down Management:

“It is now 10 years since we decided to introduce Upside Down Management and it is making a massive difference. Nevertheless, it is not easy to change culture. Anyone who is thinking of following in our footsteps should take note of the vital ingredient that is needed to make it work: the Chief Executive must be the champion of Upside Down Management. He or she is the only person who can make it work. If you’re in personnel, sales or marketing, don’t dream of trying to introduce Upside Down Management until you have your CEO’s 100% commitment. Upside Down Management is all or nothing, only the CEO can do this, and in doing so he or she must understand how it will change everyone’s job. The CEO must have the determination to replace orders, memos, KPIs and nitpicking with praise, lots of listening, and clear obstacles out of the way to give people true freedom to operate. The Chief Executive must be on a mission to change everyone’s perception of management. Doing things upside down is nothing like what they teach at management school. In doing so, they must understand the importance of personality and identify the drongos who would obstruct progress.

Don’t expect Upside Down Management to take root overnight. Give it plenty of time – you have got to promote it, sell it and nurture it. Everything has to be introduced by persuasion because that is the way you run an Upside Down business. Upside Down Management may take years to establish, but eventually it will start to work….”

In a nutshell: the CEO must be 100% committed; pick the right people to help you make it happen; no compromises – none at all; and patience – can take five years.

What will it take to change the culture of the financial services industry?

Let’s answer this question of culture change in the financial service industry through the lens of game theory and the Prisoners Dilemma. At its simplest level we can say that there is a game going on between the financial services industry and customers/society at large. The financial services industry can choose one of two options: co-operation or defection. The same choice falls to customers/society. Put this way it sounds like there is a balance of power between the financial services industry and customers/society. That is not the case and that is the heart of the issue.

The setup is such that it ALWAYS pays for the financial services industry to adopt the practice of ‘defection’ – to pay back the co-operative behaviour of customers/society by taking advantage of it to benefit the financial services industry. So the challenge is to shift the industry and the key players (the shareholders and the Tops) to the practice of ‘co-operation’. How to do that? The simple answer is to change the structure of the game between financial services and customers/industry such that the practice of ‘defection’ hurts (a lot) and the practice of ‘co-operation’ pays. That means putting place strong penalties for the Tops (going to jail) and the shareholders (massive fines) for practices that constitute ‘defection‘. Which in turn means getting rid of ‘light regulation’ and replacing it with ‘smart regulation’. And it means putting teeth into the regulators – so that they have the will, the skills/expertise, the resources, the permission needed to detect and punish ‘defection’ practices. This means more than adequate funding, it means getting rid of the conflicts of interest at the heart of regulators. Too often the regulators are cheerleaders for the industry players.

How likely is that to happen? Not likely. Why? First, there is the practice of those at the heart of government going into the financial services industry, when they are no longer in government, and making vast sums of money. Second, there is the practice of the revolving door between those that are in/represent the financial services industry. Who was brought into advise and help deal with the mess of the credit crunch? The people who had played a substantial role in the mess and whose careers/livelihoods were invested in the financial service industry. To effect culture change in the financial services industry would require a change in these practices. For example, making it illegal for any person in government to work with/advise anyone in the financial service industry during their time in government plus 5 years.

Now we come to the who question: who is willing to take on that task? Which prime minister is willing to forgo the many millions to be made through consulting/advising/sitting on the Boards of the financial giants? Yet, I am open to surprises and being surprised. Who would have thought that Bob Diamond would be pushed out of his role as CEO?

Summing up

Culture is constituted and shows up through language and practices. If you change the language and the practices – and make this change stick – then you have changed the culture. Culture is always changing because practices and language are changing. One of the biggest drivers of change in practices and culture, today, is technology. The reason that the financial services industry does what it does is because there are no practices in place to punish players in the financial services industry for the behaviour that costs customers, cost society at large.

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Author: Maz Iqbal

Experienced management consultant working at the intersection of strategy, customer, and technology. Combine a tendency to think strategically with a penchant for getting my hands dirty at the coalface of implementation.
View all posts by Maz Iqbal

2 thoughts on “Culture Change: what does it take to change culture in a business? in the banking industry?”

You are saying a lot, too much for one blog. I’m really grateful that you have taken the time to think about it and share. Our views on culture change may differ. Our recognition that things have to change is the same.